The results show just how much the new regulatory environment, as well as recent market tumult, are spurring Goldman Sachs to take less risk. It is a real turnabout for the bank, which in the years leading up to the financial crisis was one of the most aggressive on Wall Street.

A measure of Goldman's risk-taking fell 16 percent from the same quarter last year and 29 percent from the fourth quarter. The bank said it was boosting its dividend, which to some analysts is a signal that it sees fewer opportunities for making money in markets.

"We have been cautious on risk and we remain cautious on risk given the environment," Goldman Chief Financial Officer David Viniar said on a conference call Tuesday morning. "And I think that is also reflective of the fact that our clients have been cautious on risk and remain cautious on risk."

As part of its de-risking strategy, Goldman sold $2.5 billion worth of its stake in Chinese bank ICBC (1398.HK) this week. Goldman has held a stake in the bank since 2006, but the investment has been a volatile one in recent years, alternating between quarterly gains and losses of $905 million and $1.05 billion, respectively, since 2010.

Goldman's ICBC investment is now worth just under $2 billion, Viniar said, describing the stake reduction as "purely a de-risking sale" because it had gotten too big.

In fixed income, currency and commodities trading, one of the biggest sources of profit for the bank over the last decade, Goldman highlighted interest-rate products as a bright spot and said other major businesses reported lower revenue.

In another move that made the Wall Street firm look a little more like a run-of-the-mill commercial bank, Goldman raised its dividend 31 percent to 46 cents per share.

It is only the third dividend increase since the bank went public in 1999. It last raised the dividend in 2006. Goldman executives have repeatedly said they prefer using capital for business investments, or returning money to shareholders through stock buybacks.

The decision to raise the dividend came after pressure from shareholders, Viniar said, but management expects buybacks to be "the predominance of our capital management activity."

The bank spent $362 million to buy back 3.3 million shares during the first quarter, on the heels of a $6 billion buyback program in 2011. Management is authorized by Goldman's board to repurchase another 60.3 million shares.

Goldman's new dividend represents a payout ratio of 27 percent of its average earnings over the past four quarters.

Its chief Wall Street rival, Morgan Stanley (MS.N), pays a quarterly dividend of 15 cents per share, which represented 54 percent of average 2011 quarterly earnings. Morgan Stanley, which reports first-quarter results on Thursday, has said it will not increase its dividend in the near term because it plans to use capital to buy a greater portion of its Morgan Stanley Smith Barney joint venture with Citigroup.

But JPMorgan Chase (JPM.N) and Wells Fargo & Co (WFC.N) both recently raised dividends when announcing first-quarter results. JPMorgan's upcoming quarterly dividend of 30 cents per share represented 27 percent of average earnings for the past four quarters. Wells Fargo's dividend of 22 cents per share represented an average payout ratio of 30 percent.

Bank of America Corp (BAC.N) and Citigroup Inc (C.N) pay nominal dividends of a penny per share.

Goldman's shift toward a lower risk profile comes as investment banks have found their profits under pressure from continued stress in the capital markets. New U.S. regulations are aiming to limit risk-taking at the biggest banks, through measures including higher capital requirements, restrictions on trading, and curbs on investments in hedge funds and private equity.

But investors had been expecting Goldman to find ways to increase profitability and post even stronger results, especially after JPMorgan and Citi outperformed expectations in the first quarter.

Goldman's revenue from fixed income, currencies, and commodities was $3.5 billion, down 20 percent from a strong year-ago quarter but more than double the fourth quarter. UBS analyst Brennan Hawken described the revenue as "light" against his forecast of $4.2 billion.

Revenue was down across most of Goldman's businesses compared with a year earlier, except for financial advisory and stock trading for clients.

Its investment management division was perhaps the weakest business, reporting net outflows and lower revenue. Analysts had expected gains at money-management firms across Wall Street because of a stock market rally during the first quarter.

"We believe the market was expecting a strong quarter, particularly after seeing the capital markets revenue beats at the universal bank reports thus far," said David Trone, an analyst at JMP Securities. "Add the investment management difficulties and Goldman shares could be in a tug-of-war today."

Goldman's shares ended the day down 0.7 percent at $114.86 on the New York Stock Exchange. The stock is up 29 percent so far this year.

PROFIT BEATS EXPECTATIONS

Goldman earned $2.07 billion after preferred dividends, or $3.92 per share, for the first quarter. In the year-ago period, which was generally stronger for investment banks' trading and banking activity, it earned $4.38 per share, excluding a one-time cost for buying back preferred stock from Warren Buffett's Berkshire Hathaway Inc (BRKa.N).

Analysts had expected $3.55 per share, according to Thomson Reuters I/B/E/S.

Goldman's annualized return-on-equity - a closely watched measure of profitability - was 12.2 percent during the first quarter, up from a meager 3.7 percent last year, but still far below pre-crisis levels above 30 percent.

"You saw pretty good pickup in ROE, although not something that we consider acceptable," Viniar said.

The bank's average daily value at risk - which measures the maximum that Goldman could have lost on 95 percent of trading days - was $95 million during the first quarter, down 16 percent from the year-ago period and 29 percent from the fourth quarter.

With revenue under pressure, Goldman also made further cuts to staffing and expenses to boost its bottom line. The bank set aside $4.4 billion for compensation and benefits during the first quarter, down 16 percent from a year earlier. It also reduced its workforce by 900 employees, or 3 percent.

The staff and cost reductions were the final stretch of an aggressive cost-cutting program that began during the second half of 2011. Viniar said Goldman is likely finished with the effort as long as market conditions do not unexpectedly change.

(Additional reporting By Rick Rothacker and Jed Horowitz; editing by Paritosh Bansal, Dan Wilchins, John Wallace, Leslie Gevirtz)

• A Permanent Economic Emergency